The First Facility Management Blog

The wide array of career opportunities in real estate management are detailed in new, generously illustrated, 25-page brochure published by the Institute of Real Estate Management (IREM®).

In a 2007 survey conducted by CNN and Careerbuilder.com, property/real estate management was listed among America’s top 40 careers. A year earlier, in a survey of the top 50 careers in America conducted by Money magazine and Salary.com, the position of property manager was ranked number 23. Both surveys considered job growth, average salary, education need, and working conditions in the rankings.

According to IREM President Pamela W. Monroe, many real estate management professionals are reaching retirement age in the near future, so real estate owners and investors must increasingly seek replacements for them. “This demographic reality,” said Monroe, “combined with a management function that has become more complex and sophisticated, has created an almost perfect storm that is boosting demand as never before.”

The brochure provides answers to key questions that students and others seeking a rewarding career path may have including:
—–What a real estate manager does
—–The kinds of positions available in the field
—–Categories of employers who hire real estate managers
—–How to prepare for positions in the field
—–Scholarships and internships available
—–How to actually find employment
—–How much one can expect to earn

To request a free copy of this brochure, send an e-mail to tfm@groupc.com with the words “CAREER BROCHURE” in the subject line.

“With more and more distressed commercial real estate assets expected to come on stream as a result of serious liquidity and other problems, the need for superior real estate management, marketing, and leasing skills — and a proven record of performance — will become increasingly and acutely apparent,” said IREM® President Pamela W. Monroe, CPM®. “Our nation’s economic viability requires real estate management professionals with top-notch credentials to inject value back into distressed properties by protecting income streams, controlling expenses, positioning and/or repositioning them to deliver the best possible ROI and, ultimately, to command the best possible price when they are sold.

“Indeed,” Monroe added, “highly skilled real estate managers, by virtue of their professional education and experience, know how to deal with properties in transition as well as the formidable challenges of a down economy. Simply stated, they know how to salvage, maintain, reshape, and remarket what is expected to be an enormous pool of troubled real estate assets.”

Monroe reports that IREM recently convened a group of some of its volunteer leaders who experienced the real estate market turmoil of late 1980s and early 1990s and asked them to share their observations relative to today’s financial crisis. Here are some of their thoughts:

• The culprit that triggered the S&L crisis of the early 1990s was overbuilding; too much supply; not enough demand.
• Today’s culprit is excessive leverage and unrealistic appreciation expectations.
• While real estate is cyclical, not all property types are at the same place in the cycle at the same time. One property type may be doing well while another may be suffering from overbuilding.
• The starting point for managers when dealing with distressed properties, no matter what the circumstances, is to analyze them for best use — this could mean short- or longer-term — based on the owner’s goals.
• Advice should be property specific and location specific.
• The end product of comprehensive research and analysis should be a management plan that carefully details all aspects of the property and includes an analysis of marketplace dynamics; identification of the property’s problems and challenges; identification and analysis of possible solutions; and, finally, a recommended solution that reflects the owner’s goals.
• The “devil is in the details” and thinking “out-of-the-box” is essential.

“IREM believes in the power of knowledge and the importance of sharing it,” said Monroe. “So the organization has identified distressed property member experts for each key property sector. These experts will serve as information resources for the IREM membership community and the industry at large.”

The Institute of Real Estate Management (IREM® ) and the CCIM Institute recently joined forces to raise awareness on Capitol Hill of key issues affecting the commercial real estate industry. Approximately 275 IREM and CCIM Institute members representing 40 states and the District of Columbia held 220 meetings with their respective senators, representatives, and their staffs to voice the industry’s concerns about these critical topics: Energy Tax Credits; Climate Change/Energy; Natural Disaster Insurance; Leasehold Improvements; and Capital Gains/Depreciation Recapture.

Energy Tax Credits
IREM and CCIM Institute believe that incentives for energy efficiency investments are the best way to promote conservation. While many legislative proposals threaten to require mandates for green buildings and “zero-net” energy, the two organizations support positive incentives as the best way to achieve the goal.

IREM and CCIM Institute support H.R. 5351, the “Renewable Energy Conservation Tax Act of 2008.” This legislation will extend tax incentives for energy efficiency in commercial buildings and allow a five-year recovery period for the depreciation of qualified energy management devices.

Climate Change/Energy
Today, commercial buildings make up 73 billion square feet of real estate in this country. IREM and CCIM Institute believe that lawmakers need to understand the benefits of market based incentives to retrofit existing buildings for energy efficiency and the serious consequences to mandating the same.

Natural Disaster Insurance
The intensity of large natural disasters in recent years has made the acquisition of adequate property insurance very difficult in some areas. Insurers are declining to write policies, canceling existing policies, or increasing premiums on existing policies. Recently, Hurricanes Katrina and Rita have refocused attention on this issue. The viability of the insurance market is critical to real estate financing. IREM and CCIM Institute believe that both commercial and multifamily properties should be covered, in addition to homeowner’s insurance.

IREM and CCIM Institute Members lobbied their legislators to amend the “Homeowners Defense Act” (H.R. 3355 and S.2310) to include protection for commercial and multifamily properties.

Leasehold Improvements
IREM and CCIM Institute believe that it would be unrealistic to revert to the prior recovery period of 39 years depreciable life for tenant improvements. In their view, a realistic cost recovery period, such as 10-15 years, is a reasonable incentive to keep downtown office, commercial and retail space modern, efficient, and competitive with suburban space. In addition, such a change would more closely mirror corresponding lease terms for these properties.

IREM and CCIM Institute support the “Leasehold Improvement Depreciation Act of 2007” (H.R. 2014/ S. 1361), which would make the 15-year recovery period for leasehold improvements permanent.

Capital Gains/Depreciation Recapture
Under current law, capital gains are taxed at a maximum rate of 15%. This rate is temporary and will revert to 20% as of January 1, 2011. When capital gains tax rates were reduced to 15% from 20% in 2003, the depreciation recapture rate remained at 25%. Before 1997, depreciation recapture amounts were taxed at the same rate as capital gains.

IREM and CCIM Institute support a level playing field for those who choose to invest in real estate and thus oppose rates for depreciation recapture that are higher than the capital gains rate.

Total collections for suburban office complexes nationwide in 2006 increased a modest 2.5% from 2005 levels to $19.43 per square foot of net rentable area, whereas those for downtown properties decreased just 0.4% to $19.25 per square foot. Total actual collections for suburban properties were 0.9% more last year than their downtown counterparts.

These are among the findings reported in the 2007 edition of the Income/Expense Analysis®: Office Buildings, a new benchmarking study published by the Institute of Real Estate Management (IREM®). This annual research study, conducted by IREM® since 1976, analyzes operating income and costs for over 2,400 private-sector buildings in major metropolitan areas and regions in the United States. It is designed to help property owners, managers, investors, appraisers, lenders, developers, and other real estate professionals evaluate their buildings’ performance and prepare budget and revenue projections, feasibility studies, etc.

TOTAL OPERATING COSTS ESSENTIALLY STABLE
Total operating costs for suburban buildings in 2006 rose just 3.5% from the prior year to $8.30 per square foot, while operating costs for downtown properties dipped 1.7% to $8.85 per square foot of rentable area.

Nationally, net operating costs for suburban buildings increased a slight 2.9% to $6.02 per square foot in 2006 vs. 2005, whereas net operating costs for downtown properties decreased 1.0% to $6.64 per square foot.

KEY EXPENSE COMPARISONS
All major expense categories for suburban properties increased modestly except for insurance costs and administrative/benefits costs, which decreased 1.9% and 3.6%, respectively. Utility costs saw the largest increase, 5.4%, followed by real estate and other taxes, up 4.4%, and janitorial/maintenance costs, up 2.9%.

In contrast, all major expense categories for downtown properties decreased except for utility and insurance costs, which increased 4.0% and 0.8%, respectively. Administrative/benefits costs declined 6.6% in 2006 vs. 2005 and janitorial/maintenance costs dipped 1.2%.

Focusing again on major expense categories, but as a percentage of total operating costs, the IREM® study reveals that suburban properties spent 25.4% of their operating budget on janitorial/maintenance services, 23.6% on utility costs, 22.9% on real estate and other taxes, 13.0% on administrative/benefits costs, and 12.5% on insurance services. Similarly, expenditures for janitorial/maintenance services accounted for the largest chunk of downtown properties’ operating budgets, 27.9%, followed by 23.4% spent on utilities, 21.8% spent on real estate and other taxes, 13.6% spent on insurance services, and 12.8% spent on administrative/benefits.

Overall, suburban properties proved 6.2% less costly to operate in 2006 than their downtown counterparts as all expense categories were less than those experienced by downtown buildings.

VACANCY RATES STAY THE SAME
National vacancy levels for both suburban and downtown office properties in operation for 12 months or more were exactly the same last year vs. the prior year. Vacancy levels for suburban office properties were 5.0%, and those for downtown office properties were 7.0%.

MEDIAN OPERATING RATIOS
Though suburban properties reported higher total actual collections than downtown properties in 2006, the overall operating experience of both downtown and suburban office markets were similar as reflected by their median operating ratio (total operating costs divided by total actual collections). The median operating ratio at suburban properties was 0.43, while the operating ratio at downtown properties was 0.46.

STUDY EXAMINES MORE THAN 50 SPECIFIC CATEGORIES
The IREM® Income/Expense Analysis® research study contains detailed analyses of office building operating revenues and expenses for major metropolitan areas and suburban markets in the United States. The income and expense data is presented in dollars per square foot for more than 50 specific categories broken out by building size, height, age, and rental range.

PRICE AND ORDERING INFORMATION
The 286-page Income/Expense Analysis®: Office Buildings is available for $391.95 (plus $13.25 shipping and applicable state sales tax). The IREM member price is $195.95. To order, call the IREM Customer Service Department at (800) 837-0706, ext. 4650.

In addition to the traditional printed format, the new 2007 Edition is available online. The data is easily downloadable in both Excel and PDF file formats, and is completely customizable in Excel.

FOUR OTHER 2007 I/E ANALYSIS BENCHMARKING STUDIES AVAILABLE
IREM® also has just published new 2007 editions of its four other annual Income/Expense Analysis® studies: Conventional Apartments ($391.95); Shopping Centers ($391.95); Condominiums, Cooperative: Planned Unit Developments ($346.95); and Federally Assisted Apartments ($346.95). IREM members receive a 50% discount on each study and member and non-member purchasers of all five studies receive a 15% discount on their total order.

Real estate management professionals holding the Certified Property Manager® (CPM®) designation earned median total compensation of $103,000 in 2006, primarily from base salary for their management duties but also including additional income from sales and leasing commissions as well as other real-estate-related activities. By comparison, CPM® designees’ median total compensation was $95,000 in 2003, $83,000 in 1999, and $50,800 back in 1984, underscoring a history of steady income growth.

On a separate note, those pursuing the CPM® designation, termed CPM® Candidates, earned $75,000 in median total compensation last year versus $73,000 in 2003, $64,000 in 1999, and $35,000 back in 1984.

These are among the findings of the 2007 edition of the Certified Property Manager® Profile and Compensation Study conducted by the Institute of Real Estate Management (IREM®). The Institute awards the CPM® designation to real estate and asset managers who have met strict criteria in the areas of education, examination, experience, and a commitment to uphold the IREM Code of Professional Ethics.

IREM periodically surveys its CPM® Members and Candidates – of whom there currently are approximately 8,560 and 3,150, respectively, in the United States and abroad – to compile, analyze, and compare the most critical components of real estate managers’ compensation and benefit packages. The published survey findings provide detailed comparisons based on portfolio size, area of management specialization, and level and types of experience and explain how each of these variables affects salary levels and the total compensation package.

Among other key findings of the 2007 edition of the study:
•Regionally, CPM® designees and Candidates located in the Pacific Coast states earned the highest total compensation. In contrast, CPM® designees in the Southwest earned the least, as did Candidates located in the Midwest/North Central region.

•The average CPM® designee is 49 years old, has earned a college degree, works for a full service real estate or property management company, and averages 22.4 years of experience.

•The average CPM® Candidate is 42 years old, has earned a college degree, works for a full service real estate or property management company, and averages 13.9 years of experience.

•51.6% of CPM® designees are male, whereas 62% of Candidates are female.

•About 52% of CPM® designees and 53% of Candidates, respectively, are employed by or associated with a property management division or firm of 50 or less employees.

•CPM® designees typically hold executive or property manager/supervisor positions within their firms. In contrast, while many Candidates occupy more senior positions, more than four in ten define themselves simply as property managers.

•CPM® designees and Candidates who characterized themselves as owners, partners, presidents/CEOs and directors reported receiving considerably greater compensation than other respondents.

•On the other end of the spectrum, those in both groups who view themselves simply as site managers reported receiving the lowest levels of compensation.

•CPM® designees who work for development companies, full-service real estate companies, REITS, and investment companies typically receive higher compensation than those who work for other types of employers.

•Similarly, CPM® Candidates who work for development companies, REITS, and investment companies were the best compensated.

•Office buildings account for the largest share of portfolios managed by CPM® designees and Candidates, followed by conventionally financed apartments.

•Salary and total compensation for CPM® designees and Candidates usually increase with the number of residential units or commercial square feet managed.

•Compensation for both CPM® designees and Candidates typically increases as their age increases, up to age 60.

The study findings summarize the results of the “CPM®/Candidate Confidential Inventory and Salary Questionnaire” fielded online by the IREM® Research Department in January 2007. Findings are based on responses received from 1,134 CPM® designees and 583 CPM® Candidates.

The 2007 edition of the Certified Property Manager® Profile and Compensation Study is priced at $47.95 for IREM® Members and $59.95 for non-members, plus shipping, handling, and applicable state sales tax. To order, contact the IREM® Customer Relations Department at (800) 837-0706, ext. 4650. Internet users can order the study in soft cover or in a downloadable format by accessing the IREM Bookstore in the Publications section of the IREM Web site.

The Orange County Chapter of the International Facility Management Association (IFMA) has partnered with the Orange County Chapter of the Institute of Real Estate Management (IREM) and the Orange County and Greater Los Angeles Chapters of the Building Owners and Managers Association (BOMA) to accept non-monetary donations on behalf of the communities affected by the recent Southern California wildfires.

“We’ve been working diligently to establish relationships with other associations to expand our outreach and our resources,” said Orange County Chapter of IFMA President Diane Coles. “We knew that collaboration was key, because together our efforts will have a far greater impact.”

Currently being accepted are donations of non-perishable food items such as canned goods, pasta and bottled water; grocery gift certificates; gas cards; personal items such as shampoo, soap and diapers; and clothing.

All donations will be taken to local relief organizations such as the American Red Cross, Goodwill, Second Harvest Food Bank, and the Orange County Rescue Mission. These organizations will distribute the items to fire victims throughout the Southern California area.

Those interested in helping the Southern California fire victims can send their non-monetary donations to:
BOMA IREM IFMA (So Cal Fire Relief)
1405 Warner Avenue
Tustin, CA, 92780
714-258-8330

Architecture For Humanity has also been organizing efforts since the fires broke out at the end of October. AFH San Diego and Los Angeles Chapters immediately got right to work responding to the fires that left thousands of homes destroyed.

There is now an appeal to support this work and help with reconstruction, particularly with regard to long-term rebuilding of community facilities. To support these efforts with a tax deductible financial contribution, please log on to the AFH site and click on the donate button under the SoCal appeal. Also, if you know (or work for) any of the big name LA architects - try to convince them to pitch in….

Late last week (11/1/07), the Institute of Real Estate Management (IREM®) stated its formal opposition to efforts by the House Ways and Means Chairman Charles Rangel (D-NY) ) to advance legislation that would make major changes to the tax structure. Said IREM President Regina Mullins, “the bill proposes a massive tax increase for real estate partnerships, raising the tax rate on ‘carried interest’ from 15% to 35%. This legislation would have a very adverse effect on commercial real estate projects, many of which are organized in partnerships.”

According to Mullins, specific reasons why IREM views the proposed legislation as being detrimental to real estate practitioners include:
—–Driving investors to put their money in stocks and other investment instruments that offer much more favorable tax treatment.
—–Diminishing the value of, and/or putting many partnerships out of business, because the capital would not be available to facilitate them.
—–Creating a disincentive to investing in real estate since many such investments would no longer earn a reasonable profit.
—–Stifling growth in a part of our economy that has become increasingly important over the last several years due to manufacturing, call centers, and other key industries moving offshore.
—–Punishing partners involved with previously arranged transactions by causing a totally different economic result than they had anticipated.
—–Failing to recognize that many real estate investors are involved in their investments daily, unlike many hedge fund managers who are not.

The Institute of Real Estate Management (IREM), an affiliate of the NATIONAL ASSOCIATION OF REALTORS, is the only professional real estate management association serving both the multi-family and commercial real estate sectors. IREM promotes ethical real estate management practices through its credentialed membership programs, including the CERTIFIED PROPERTY MANAGER (CPM) designation, the ACCREDITED RESIDENTIAL MANAGER (ARM) certification, the ACCREDITED COMMERCIAL MANAGER certification, and the ACCREDITED MANAGEMENT ORGANIZATION (AMO) accreditation. These esteemed designations certify competence and professionalism for those engaged in real estate management. In addition, IREM offers Associate, Student and Academic memberships.

The Institute of Real Estate Management (IREM®) reached a milestone recently when it awarded its 20,000th Certified Property Manager® (CPM®) designation. Jordan K. Debes, CPM®, a real estate manager for the Cabot Group, based in Rochester, NY, is the honored recipient.

IREM President Robert Toothaker, CPM, commenting on this achievement, noted that: “A just-completed CPM Profile and Compensation Study, which we update every three years, finds that CPM holders collectively manage over $1.5 trillion worth of real estate in the U.S. alone, including 8.4 million residential units and 8.4 billion net square feet of commercial space. This reach escalates,” added Toothaker, “when you consider that CPM members manage real estate in 29 countries around the globe.”

Other findings of the CPM Profile and Compensation Study cited by Toothaker are these:
* CPM designees are at least 66% more likely to hold top management positions (owner/partner or officer/director) than CPM Candidates.
* Average total compensation packages for CPM designees can exceed by 44% the packages of CPM Candidates.

The CPM designation will mark its 70th anniversary in 2008, an event that will coincide with IREM’s 75th anniversary celebration. The credential is designed for individual real estate and asset managers working with large portfolios covering all property sectors – residential, commercial, retail, and industrial.

Requirements to earn it are:
* Education – through IREM courses, through other organizations, through academic achievement
* Experience – minimum of three years of qualifying real estate management experience
* Ethics – pass the IREM ethics course and promise to uphold the IREM Code of Professional Ethics
* Examination – show competency in all aspects of real estate management by passing a certification exam; in addition, demonstrate the practical application of all that has been learned on the job and in the classroom through a written management plan.

Earlier this month (8/8/07), Bette Fears, Accredited Residential Manager® (ARM®) and honored member of the Institute of Real Estate Management (IREM®), was tragically murdered in the line of duty while serving as an apartment community manager in Coeur d’Alene, ID. Fears was killed by an allegedly disgruntled tenant who then took her own life.

In recognition of Fears’ contributions to the real estate management profession, IREM® Foundation, together with IREM’s Spokane, WA-based Inland Northwest Chapter No. 49, with which Bette was affiliated, have launched the Bette Fears, ARM®, Memorial Scholarship Fund.

In announcing the new fund, IREM® Foundation President, E. Craig Suhrbier, CPM®, stated: “Bette touched so many IREM® lives locally, regionally and across the country because she valued greatly her interaction with others. As a member of the IREM® Foundation’s Scholarship Committee, she cared deeply for all scholarship applicants because of their desire to further their career and enhance their professionalism.”

Fears, 67, lived at the ParkPlace Apartments, which is managed by Tomlinson Black Management, Inc., AMO, Spokane, WA. She was resident manager of the complex for over a decade.

The Bette Fears, ARM®, Memorial Scholarship Fund will join three other programs – the Paul H. Rittle Sr. Memorial Scholarship, the Donald M. Furbush Scholarship, and the George M. Brooker Collegiate Scholarship for Minorities – that Bette helped to advance over many years. Contributions, which are tax deductible, should be made payable to the IREM Foundation and mailed to foundation headquarters at 430 N. Michigan Ave., Chicago, IL 60611. Donors will receive a letter from the foundation acknowledging their gift.

In other news, falsely accused security guard Richard Jewell—associated with the Atlanta Centennial Olympic Park bombings in 1996—died yesterday (8/29/07) at age 44 after suffering through a long series of illnesses. Jewell, who initially spotted the suspicious backpack in the park and saved the lives of many in attendance was eventually cleared of all wrongdoing, but not until after his name and reputation were permanently tarnished by the misdirected investigation. More on the Jewell story can be found here.

The findings of a two-part survey of current and emerging legal liability issues impacting real estate managers have been released jointly by the Institute of Real Estate Management (IREM®) and the National Association of Realtors® (NAR®), the survey’s co-sponsors. Relevant case law and statutory research was analyzed for one part of the survey; IREM members in national, regional, and local leadership positions with the organization provided input for the second part. While the survey sample of IREM leaders was too small to be statistically significant, it does identify areas of current concern that may warrant further study.

Explaining the rationale for the survey, IREM President Robert Toothaker, CPM®, stated: “A while back, IREM members identified ‘risk management’ as one of the four strategic issues affecting today’s real estate management industry (the other three issues cited were technology, workforce development, and business competition). We undertook the survey in partnership with NAR to help our members and industry colleagues better address risk management challenges in their business practices, thereby enhancing their performance on behalf of the owners and investors and other constituents they serve.”

HOT ISSUES NOW: PREMISES LIABILITY, DEBT COLLECTION, FRIVOLOUS SUITS
The most significant current legal problems identified by the 80 IREM leaders surveyed are those relating to the day-to-day business of managing properties. Premises liability issues – from slip-and-fall accidents to crimes on the property – all were deemed significant. In fact, a majority of respondents, (57%) ranked slips and falls as the single leading cause of current disputes, with more than six in 10 (63%) ranking such accidents among the top three management issues they and their colleagues face.

Debt collection also triggers many disputes right now, according to the respondents, with 48% of them ranking it the number one cause of disputes, and 53% including it among the top three management issues. Yet another significant problem area today is frivolous litigation, perceived as the single leading cause of disputes by 48% of respondents and among the top three management issues by 63%.

HOT ISSUES ON THE HORIZON: DISCRIMINATION IN EMPLOYMENT
When asked to predict which problems would become more significant over the short term – the next two years – survey respondents again cited premises liability issues, debt collection, and frivolous lawsuits. Two employment issues – age discrimination and wrongful termination – also are seen to be increasing in importance.

By comparison, when the respondents were asked to extend their predictions over a longer time line, employment discrimination based on race, national origin, and sexual orientation discrimination all were highly ranked, with several including fair housing issues in the mix.

TRAINING NEEDS IDENTIFIED
Survey respondents also weighed in on where additional training may be needed to better deal with key legal issues and concerns. Their responses closely track the key issues identified in other parts of the survey, with training needs in the areas of debt collection, premises liability and frivolous lawsuits ranked high by the respondents along with several mentioning fair housing and employment issues.